The global shortage of semiconductors has hit the auto industry hard, with millions of vehicles worldwide not being produced because critical parts are missing.
Whether buying computer chips directly from manufacturers, reconfiguring cars, or missing parts, automakers are having to get creative to deal with the global shortage of semiconductors.
Shortages due to supply problems and increased demand for consumer electricals during the pandemic have hit the auto industry hard, with millions of vehicles worldwide not being produced because critical parts are missing.
With the problem lasting longer than initially expected, manufacturers including Daimler and Volkswagen have had to rethink production strategies.
Car manufacturers typically buy parts from major suppliers such as Bosch and Continental, who in turn buy parts from suppliers down the chain.
McKinsey’s Burkee said the carmaker should consider direct investment in production, or longer contracts with terms of more than 18 months.
Ondrej Burkaki, a senior partner at McKinsey, said there has been a lack of transparency in some cases.
“It was an illusion to think you had a choice between two suppliers, but the truth is they both had chips made in the same foundry,” he said.
Now that is changing, according to Daimler Purchasing Manager Marcus Schaefer.
The German maker of Mercedes-Benz cars has established a direct line of communication with all chip suppliers, including wafer producers in Taiwan, he said at the IAA auto show in September.
Volkswagen boss Herbert Diess talks of the “strategic partnership” his company has entered into with manufacturers in Asia.
Stefan Bretzel of the Center for Automotive Management said chip suppliers need to treat them differently given their strategic importance to the industry.
“You’ve seen the problems that arise when you treat chip companies like other suppliers and shut down the call,” he said.
McKinsey’s Burkee said the carmaker should consider direct investment in production, or longer contracts with terms of more than 18 months.
“A lot of it hasn’t been implemented yet,” he said.
Volkswagen recently had to temporarily halt production of electric cars at its Zwickau plant in Germany.
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Some carmakers are stocking – or what BMW calls “hole shoring”.
The entire car is built except for one missing part, and when it is visible it can be completed relatively easily.
Other automakers are also using this strategy. Sometimes vehicles are delivered without some functions controlled by the chips.
Semiconductors are also protected for higher quality vehicles such as electric cars, while customers face even longer wait times for lower-priced combustion engines.
That strategy is slowly reaching its limits. Volkswagen recently had to temporarily halt production of electric cars at its Zwickau plant in Germany.
How well these coping strategies work is not yet clear.
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“The bill will be presented in the middle or end of 2022, when you can see who came out of the crisis well and who didn’t make it so well,” said McKinsey’s Burke.
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